GS Q1 2026 Earnings Analysis

Alex, Goldman just delivered their second-highest quarterly performance in company history. We're talking $17.2 billion in net revenues, $5.6 billion in net earnings, and earnings per share of $17.55. That drove a return on equity of nearly 20% at 19.8%. These are numbers that would make any CFO jealous.

Absolutely. Global Banking & Markets hit record quarterly revenues of $12.7 billion with an ROE over 22%. The standout here is equities, which generated a record $5.3 billion in revenues. Their equities financing business alone brought in $2.6 billion - that's up 59% year-over-year.

Exactly. CEO David Solomon specifically highlighted their progress in Asia, particularly in prime brokerage. They saw record average prime balances during the quarter, and this Asia expansion is a key part of their strategy to close competitive gaps in certain regions. It's paying off - financing revenues across FICC and equities now comprise nearly 40% of total revenues in those divisions.

Right. Advisory revenues jumped 89% year-over-year to $1.5 billion on higher completed volumes. They're sitting on some massive deals - like the $43 billion Unilever-McCormick merger and Sysco's $29 billion Jetro acquisition. What's really telling is that even after executing on extraordinary deal flow this quarter, their backlog remained "extraordinarily robust" according to Solomon.

That's right. Solomon noted that while Q1 started optimistically with markets hitting record highs, the macro environment began weighing on sentiment as the quarter progressed. Volatility increased meaningfully due to AI-driven disruption concerns, uncertainty in parts of private credit, and the Middle East conflict. This particularly impacted IPO activity in March.

Solomon was pretty direct about this. He pointed out that while private credit broadly is about $3.5 trillion, the direct lending space getting all the negative attention is around $1.6-1.7 trillion, with only about 20% or $230 billion in retail NAV. Goldman's platform is over 80% institutional investors with very broad diversification. Interestingly, he noted that 40% of their Q1 subscriptions in their credit BDC came from institutions, many first-time investors including insurance companies and pension funds.

He provided some historical context that I found fascinating. During the global financial crisis - arguably the toughest credit cycle - cumulative default rates across leverage lending were 10%, recoveries about 50%, so cumulative losses were 5-6% against coupons of 9-10%. His point was that even in severe downturns, the business model holds up, and spreads actually become more attractive for lenders.

Goldman is doubling down on what they call "One Goldman Sachs 3.0." They're accelerating investments in cloud migration and data infrastructure as foundational elements for AI deployment. Solomon was bullish on AI's potential to drive efficiency and operating leverage, saying he has "high degree of confidence" about the firm's 3-5 year growth trajectory partly due to these technology investments.

They're targeting a 60% efficiency ratio, and this quarter came in at 60.5%. Non-compensation expenses were up, but CFO Denis Coleman noted that about $650 million of the $750 million increase was transaction-based expenses tied to higher activity levels. So essentially, they're spending more because they're doing more business.

It is, but it's strategic. They deployed capital into client franchise activities - prime brokerage, acquisition financing, lending to ultra-high net worth clients which hit a record $46 billion. They also returned a record $6.4 billion to shareholders, including $5 billion in buybacks. Management sees 12.5% as appropriate given the regulatory environment and client opportunities.

Yes, Solomon expressed encouragement about the direction of recent Basel III finalization and G-SIB surcharge re-proposals, calling them "more balanced and risk-sensitive" than earlier iterations. This could provide more clarity and potentially better capital treatment going forward.

Solomon sees potential for a "more constructive backdrop" driven by fiscal stimulus, ongoing AI-related capital investment, and more balanced regulatory agenda. However, he acknowledged the complex geopolitical landscape and uncertainty around energy prices' impact on inflation and growth. The key theme was diversification paying off - even with weaker sponsor activity and some FICC headwinds, they delivered record results because of their scaled, global platform.

One interesting exchange was about their Asset & Wealth Management flows. They're tracking well ahead of their 5% annual target for long-term net inflows, hitting 9% in just the first quarter. They also just closed the Innovator acquisition, adding $31 billion in assets and making them a top-10 global active ETF provider.

Goldman demonstrated the power of diversification this quarter. When you have record performance in some businesses offsetting softness in others, that's exactly what you want to see from a financial services firm. The question going forward is sustainability - how much of these results, particularly in equities, represent a new baseline versus elevated activity levels. Everything discussed is AI-generated analysis for educational purposes. Past performance doesn't guarantee future results. Please do your own due diligence.